Mitigate supplier risk to safeguard your brand

Reputable brands attract good suppliers, valuable partners and strong customers. They enjoy a positive public image and are seen as the benchmark for other players in their respective fields.

But it is not only clever marketing and strategic public relations efforts that give prominent brands around the world their position at the top.

“A brand’s reputation is, first and foremost, dependent on a company’s ability to deliver on promises – and leading companies are well-respected because of their commitment, reliability, responsibility, compliance and, quality,” said Greg Brown, Director of LexisNexis Governance, Risk & Compliance in this month’s SmartProcurement.

Reputational threats

“One particular area of focus that deserves serious attention is the relationship between business and supplier, which if weak or questionable, can significantly undermine a business’ reputation,” noted Brown.

Considering that businesses rely greatly on suppliers for anything from the office coffee to I.T. or logistics support, it is obvious that the interaction with vendors can have a substantial impact on a business’ operation.

"Strained supplier relationships or inefficiencies can threaten your company’s reputation because delivering the end product or service to clients is still your responsibility, regardless of your supplier,” Brown added.

Suppliers who do not enjoy a good reputation within their own industry can also negatively affect your business by association. “A key practice to mitigate this risk is by investigating negative and positive news on vendors,” said Brown. “That way, you can make informed decisions about your associations.”

Internal controls

Bribery, corruption and fraud within an organisation can tarnish a business’ reputation and in many instances can be linked back to suppliers. “It is important to be in control and to identify any threats of corruption by recognising potential connections between suppliers and employees,” said Brown.

“ProcureCheck allows you to recognise conflicts of interest within your organisation and potential vendors or supply chain partners,” said Brown.

“This system also offers a module that helps with combatting corruption by identifying potential connections and ownership of property, as well as highlighting any outside business interests of employees within an organisation,” he added.

Legal compliance

Additional key features of the software that are beneficial to Supply Chain Management Officers include assistance with compliance with the Public Financial Management Act during the procurement process.

In accordance with Section 16A8.1 of the Act, which touches on “Compliance with ethical standards”, the software ensures that supply chain officials meet all conditions as stipulated in 16A8.3 of the Act.

“Problem areas that can taint your supply chain include possible conflicts of interest that may arise during the co-ownership of property by supply chain officials; additional directorship of conflicting or tendering companies or through the acceptance of gift in the form of immovable property,” said Brown.

The reports generated by ProcureCheck may also be used by the accounting officer in the submission of information to the relevant treasury (16A11 of the Act).

“ProcureCheck forms an integral part of the supply chain management policy and promotes adherence to the code of ethical standards as outlined by the Municipal Finance Management Act No. 56 of 2003; 46, Ethical standards.

“Companies tend to focus primarily on minimising their negative ethics risks, since they understand that unethical beliefs, practices or behaviour can expose them to financial loss. The use of the software in supply chain management can help to eliminate corruption and fraud by promoting strong ethical standards and good business practice,” said Brown, adding that this in turn promotes a strong company ethics culture in accordance with King III.

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